EDITORIAL: Ill winds blow for Taiwan’s economy

Electronics, information and communications products are the pillars of Taiwan’s outbound shipments, accounting for about one-third of total exports. The latest sales data from key manufacturers in these fields, however, has shown trade has significantly weakened, something that bodes ill for the economy.

Last week, smartphone maker HTC Corp posted a 19.87 percent decline in revenue for last month from a year earlier and a 30.84 percent fall in accumulated sales during the first four months of the year amid fierce competition from Apple Inc and Samsung Electronics Co in the US market.

The nation’s top contract notebook computer makers such as Quanta Computer Inc, Compal Electronics Co, Wistron Corp and Inventec Corp also posted declining sales in the first four months, while e-paper display supplier E Ink Holdings Inc said its executives would take a 20 percent salary cut while some employees are sent on unpaid leave, after sales declined 47.06 percent year-on-year last month and dropped 59.03 percent for the first four months.

Recent economic data released by the government have provided more cause for concern over national exports. Worse still, growing uncertainty over European debt and slowing growth in the economies of China and the US pose downside risks to Taiwan’s economy in the coming months.

For instance, data released by the Ministry of Finance last week showed that slowing demand from China, Japan and the US contributed to Taiwan’s exports last month declining by 6.4 percent year-on-year and 3 percent month-on-month to US$25.54 billion. In the first four months, the nation’s accumulated exports fell 4.7 percent year-on-year to US$96.37 billion, the worst performance among the four Asian Tigers, according to the ministry’s tallies.

A closer look at the data revealed that eight of the nation’s 10 major export sectors posted a year-on-year decrease in shipments during the first four months, with the information and communications sectors leading the contraction at 16.1 percent, followed by a 11.4 percent decline in chemicals, a 9.4 percent fall in optical products (including panels used in flat-screen TVs) and a 6.4 percent drop in textile products. While exports of machinery products fell only slightly — 0.9 percent over the period — the decline has alarming implications for the sector, as it was the first contraction the industry has seen in three years after the 2009 global financial turmoil.

Like other economies in Asia, Taiwan’s export performance is certain to be negatively influenced by developments in the world’s major economic engines. With the EU, the US, Japan and China either struggling with financial woes, entering into a fragile recovery or showing sluggish growth, Taiwan cannot avoid the impact, and lower outbound shipments are the result. The question remains why the nation performed worse than neighboring countries.

The government has voiced concern about falling exports and blamed the world economy, but the fact that Taiwan has become less resilient to global economic changes than its trading rivals is worrisome and raises concerns about whether the nation can bounce back once international growth picks up.

Late last year, the Ministry of Economic Affairs set targets of 4.3 percent economic growth and an annual increase in exports of between 8 and 10 percent for this year, but these targets now appear increasingly less realistic. The declining export growth could indeed be a sign that the government has still not found an effective method to deal with the nation’s excessive concentration on its industrial sector and an over-reliance on export markets.